So, while I decline to discuss my specific situation any further, let's
take this in the abstract. My situation wasn't this dire, but there are
plenty who are in situations like this. THIS IS PURELY HYPOTHETICAL.

Let's say you're the director of product marketing for PrivateCo.com, you
are not on the board, and you're already in the highest regular-income tax
bracket. You have 100,000 options in the company at $1 a share. There
are 10,000,000 fully diluted outstanding shares in PrivateCo.com. Your
ESOP does not allow you to net exercise, so you borrow $100,000 to
exercise my options, turning them into 100,000 PrivateCo.com shares which
now have a fair market value of $10 each, and in which you have a $1 tax
basis each. PublicCo.com, a publically traded company, decides to buy
PrivateCo.com for $100M in its own stock, which trades at $100 / share.
(I'm assuming all preferred shares convert, etc.) Those 100,000
PrivateCo.com shares become 10,000 PublicCo.com shares. Disregarding AMT
considerations, and *assuming* that in fact your options were exercised
more than a year prior to the transaction --- a bad assumption, but one
which makes the numbers slightly more palatable --- we will treat this a
pure capital gain.

So here's where you are at this point:

* $100,000 in debt for the funds to exercise options
* ((10 - 1) * 100,000 * .20) = $180,000 in tax liability
* $1M in PublicCo.com stock, which is illiquid for 12 months under SEC
144
* a net worth at that point of $720,000

Note that the net worth is based on immediate liabilities but illiquid
assets. Now, imagine that this transaction occurs in May of 2000; over
the next several months, PublicCo.com drops from $100 / share to $1 /
share. Your assets are now worth $10,000. Further, there was nothing you
could've done to prevent the transaction initially --- you were not on the
board, and far be it from you as a minor shareholder to block the
transaction --- and due to SEC code there was nothing you could do to sell
the shares during the interim. Your only call was whether to exercise or
waive your right to buy your options; and NOBODY on this list --- not
Dave, not Geege, not anybody --- not WARREN BUFFETT --- would have waived
those options. Come April 15th 2001, you have to write the IRS a check
for $180,000. Not only that, but you're in the hole $100k for the funds
to exercise options.

(My own situation was nothing like what I've described; I was a
decision-maker in the process, the timing was different, it occurred
nearly a year before the market drop, I was able to net exercise, the
amounts were dramatically different, etc. This is intended to be a
prototypical situation designed to illustrate a point, not an analogy to
my own. At the end of the day, I'm net-positive in my own situation, but
less so than I would've been without some of the same kinds of mechanical
badness exhibited in the above example. My recent irritation is actually
a result of *residual* badness, as all the real events in question that
set the stage for me occurred in TY1999.)

My beef with this process: a transaction should not be a taxable event
until and unless the underlying asset becomes liquid. I.e., there should
be continuity of ownership when considering exchanging one illiquid asset
for another. Without that continuity --- under current tax and SEC law
--- it's too easy for ANYBODY --- from the board room operative down to
the mail room clerk --- to get into the above situation.